Tesla Short Seller Jim Chanos Reveals New Short Positions

Glad to be back.

It's a very low bar.

Yeah, as I posted earlier, you know, to quote my favorite Simpsons character, Comic Book Guy: most predictable breakup ever.

Yeah. So we still have advisory clients. We're not in the fund business anymore, but we do have some institutional clients. So we put out something earlier in the week on an old name of ours. So most of the people in this crowd, I suspect, would be very excited to find the next hundred-bagger. So what we did was look for something that was already up 100 times and revisit it. So that company is Carvana, which has gone up 100x since its lows in late '22. And we think that it's still a misunderstood story. The Street believes it's an epic turnaround, and we've been pointing out that, in fact, the company is still losing money, ex-gain on sale of loans. It's selling subprime loans to both affiliates and non-affiliates and booking big gains on that, representing 122% in the latest quarter of their income.

And so it's a business that is, I think, misunderstood by the Street. People are fascinated with the gross profit margins. The company excludes lots of things from its gross profit calculation that other auto dealers include, and so it makes the gross profit figure look great. And then people basically assume they'll leverage that figure. In fact, there's a lot of numbers in there that are scaling just as fast as the gross profit. But what really caught our eye and made it, I think, timely is a couple of positioning aspects, which these days on the short side are really important. Number one, the short interest is back down to multiyear lows. From being one of the most heavily shorted stocks in the market in 2023, it's now back below and back toward its pre-COVID levels of short interest, as a percent of shares outstanding below 10%.

But perhaps even more ominous is that the insiders have begun to sell in an absolute torrent of stock. And it's not just the Garcias — the chairman and his son, the CEO — but it's pretty much the C-suite are getting out seemingly as fast as they can. So again, I don't know what they see in terms of the near term. And the final thing I would point out to the audience is that although it's priced as a growth stock at absolutely stunning price-earnings ratios and multiples to cash flow, the business is cyclical. Their used car revenues, their core business, dropped over 30% year over year from mid-2022 to mid-2023 when there was a slight slowdown in the economy. So this is really a company kind of at the end of the whip for retail consumers and trading at valuations that are just eye-popping.

Yeah. So the tariffs — the tariffs will hurt new car sales. Carvana is still taking market share. Valuation doesn't matter. It's trading — I should point out — it's trading at 4 to 5x the valuations of its peers, including Credit Acceptance, which we think is actually arguably the best comp, which is another subprime auto credit issuer. Because as I pointed out earlier, Carvana is making all its money in finance, not selling the cars.

It's a subprime lender. Yep.